According to the most recent tourism receipt data, the total revenue from January to September 2024 stood at USD 3.42 billion whereas the total revenue for the same period of 2022 stood at 3.02 billion. This accounts for a 13% increase in revenue. However, the arrival numbers for the corresponding periods recorded an increase of 25%.
By the end of the year the arrival numbers will exceed 2 million tourists and tourist receipts will account for over USD 4.9 billion.
As indicated in the above table, tourism receipts are on the rise year-on-year basis. However, the revenue increase lags the arrival numbers. In fact, there is a visible decline in revenue on a per capita basis. Since 2014, the per capita spending is on the decline and below that of 2011 in all years since then. (ignoring the peaks due to post covid recovery).
There could be several answers to this decline in tourism revenue on a per capita basis. Tourism is a complex industry, and its revenue analysis would require peeling off several layers to see a better picture.
But you need to start somewhere.
I thought a good starting point would be to study the evolution of market share of countries and regions because there can be huge differences within countries and across regions in terms of relative affluence level.
Relative affluence of visitors are important components of overall income from the tourism industry. In this article, I have examined the European market. Europe remains as the most significant market for the Maldives tourism industry.
Relative affluence of visitors are important components of overall income from the tourism industry. In this article, I have examined the European market. Europe remains as the most significant market for the Maldives tourism industry.
Relative affluence of European arrivals: by country
Eleven countries represent 80% of total European arrivals during the year (2023). However, the relative affluence of these source markets is quite different.
The relative affluence of the source markets plays an important role in the overall revenue from the tourism industry. As it is difficult to determine the relative affluence level of an individual visitor, to make a general conclusion, the GDP per capita of countries can be used to as a proxy for relative affluence level between countries. The most affluence country in Europe based on the World Bank’s data is Ireland with a GDP per capita of over USD 103 thousand. Therefore, the reference point for relative affluence level in this case is Ireland. The second most affluent country in Europe is Switzerland with a GDP per capita of over USD 99 thousand.
The Russian market tops the European arrivals and represents over 20% of the total arrivals during the year, however their relative affluence is 13.38%. The United Kingdom, the second largest source market, which accounts for close to 15% of arrivals, ranks below 50% in terms of relative affluence level.
In contrast, Switzerland, which ranks second in relative affluence level, represents less than 4% of total arrivals during the year. The third most affluent country in Europe, Norway, accounts for less than 1% of the market share. Except for Germany, Europe’s most affluent countries have less than 4% of the market share.
Change in regional mix over time
The European Regional arrivals have changed over the last 23 years. Twenty-three years ago, the richest region of Europe, Northern Europe, represented a market share of 21% and the region’s market share declined to 18.12% in 2023. The second richest region, Western Europe, represented more than 42% of the market share 23 years ago. The region’s market share declined drastically, and it’s just above 25% in 2023.
The largest regional market in 2023 is Central/Eastern Europe, representing close to 35% of the market share. This region used to have just above 1.6% of the market share 23 years ago.
The regional analysis reveals that the market share of most affluent regions of Europe are declining while that of less affluent regions are increasing.
Tourism revenue is on the decline
Clearly, the source market characteristics matter when it comes to revenue from the tourism industry. The revenue has in fact declined even though the arrivals have increased. If this is just a cyclical trend, one may not have to be too worried. If this is a manifestation of a secular trend, policy and strategy review should become a priority.
Clearly, the source market characteristics matter when it comes to revenue from the tourism industry. The revenue has in fact declined even though the arrivals have increased. If this is just a cyclical trend, one may not have to be too worried. If this is a manifestation of a secular trend, policy and strategy review should become a priority.
The impact of changing dynamics of an industry may be felt several years post the policy change. What we see today may be because of policy/strategy changes that took place more than 20 or 30 years ago. Policy changes without longer term impact analysis studies may be costly, irreversible and a cause for lingering pain without a cure foreseen.
The tourism is a complex and global industry, and times have change since this industry was first conceived some 50 years ago in Maldives. The world has become a different place compared to 50 years ago; the political stability in certain parts of the world, proliferation of aviation infrastructure, technology and affluence levels have considerably changed considerably. This may be the right time for a more rigorous analysis of the factors at play in this industry.
A framework that can be helpful is the Diamond Model, developed by Michael Porter, which explores the contentedness of factors that contribute to a nation’s competitiveness in specific industries.
Porter’s model has been used by many researchers and academics as a tool to analyze industry competitiveness. According to Porter, the competitive advantage is determined by four main components, one for each corner of the diamond, the Factor Conditions, the Demand Conditions, the Related Supporting Industries and the Strategy, Structures and Rivalry.
